LONDON MARKET OPEN: Stocks plunged into red as new Covid variant grips

(Alliance News) - European stock markets opened to a sea of red on Friday with a recently identified new Covid variant, called B.1.1529, worrying investors around the world.

UK officials sounded the alarm on Thursday night over the new variant, which has the potential to evade immunity built up by vaccination or prior infection.

"With the Delta wave in mind from earlier this year, investors are likely to shoot first and ask questions later until more is known about it. Unlike many, I do not pretend to be a learned armchair virologist, but viruses do not mutate to become less effective, so assuming the worst is probably the safe option for now," Oanda market analyst Jeffrey Halley said.

"The return of US markets this afternoon, mostly for a half-day session, is unlikely to change that narrative ahead of the weekend.

The FTSE 100 dropped 218.68 points, or 3.0% at 7,091.69 early Friday. The mid-cap FTSE 250 index was 575.50 points, or 2.5%, lower at 22,703.77. The AIM All-Share index was down 1.6% at 1,184.23.

The Cboe UK 100 index was down 3.1% at 702.15. The Cboe 250 was down 2.9% at 20,152.23, and the Cboe Small Companies was 1.8% lower at 14,962.03.

ThinkMarkets analyst Fawad Razaqzada said: "Just when you thought surely it can't get any worse, with inflation surging and new lockdowns and restrictions being introduced in parts of Europe, the last thing investors needed right now was this."

UK Health Secretary Sajid Javid said the new variant identified in South Africa "may be more transmissible" than the Delta strain and "the vaccines that we currently have may be less effective".

As a result, the UK government has imposed a travel ban on six African nations due to rising concerns over the new variant, which officials have dubbed "the worst one we've seen so far".

While no cases have been found in Britain, officials raised concern over a rapid rise in cases in South Africa. Only 59 confirmed cases have been identified in South Africa, Hong Kong and Botswana.

In mainland Europe, the CAC 40 in Paris was down 4.6%, while the DAX 40 in Frankfurt was down 3.8% early Friday.

Germany and Italy on Friday joined Britain in banning most travel from South Africa, while the EU separately proposed prohibiting travel from southern Africa. The EU's executive "will propose, in close coordination with member states, to activate the emergency brake to stop air travel from the southern African region due to the variant of concern B.1.1.529," EU chief Ursula Von der Leyen tweeted Friday.

ING analyst Francesco Pesole said: "More information on the variant will be needed, but it looks like it is indeed going to be a very 'black' Friday for global risk sentiment."

Travel and leisure stocks were facing the brunt of the sell-off in London.

British Airways-owner IAG slumped 15%, easyJet 12%, Ryanair 9.7%, and Wizz Air 9.8%. Tui and Carnival were down 12% and 15%, respectively.

Rolls Royce lost 2.3%, being sensitive to the fortunes of its airline customers. Premier Inn-owner Whitbread and Holiday Inn-owner InterContinental Hotels were down 7.1% and 7.6%, respectively.

Sandwich-maker and catering firm SSP Group shed 11%, while pub chains Mitchells & Butlers and Wetherspoons lost 9.0% and 6.1%. WH Smith, which has shops in train stations and airports, gave back 12%. Trainline and Cineworld were down 8.6% and 9.6%.

One of the few bright spots, Ocado rose 2.4%, as consumers are likely to ramp up home deliveries if another lockdown is introduced. Similarly, Deliveroo and Just East Takeaway added 2.2% and 3.8%.

Brent took a hit over the potential of reduced travel, trading at USD78.31 a barrel early Friday, sharply down from USD81.92. London's oil majors were being dragged lower as a result, with BP down 7.4% and Shell 'A' down 5.9% and the 'B' shares down 6.1%.

In Asia, the Nikkei 225 in Tokyo closed 2.5% lower on Friday. The Shanghai Composite ended down 0.6%, while the Hang Seng index in Hong Kong closed down 2.7%.

The S&P/ASX 200 in Sydney shed 1.7%.

Sterling was quoted at USD1.3308 early Friday, lower than USD1.3321 at the London equities close on Thursday. The euro traded at USD1.1275 early Friday, higher on USD1.1211 late Thursday.

The safe-haven yen and gold were seeing a bump.

Against the yen, the dollar fell to JPY113.80 from JPY115.34 late Thursday in London. Gold was quoted at USD1,807.10 an ounce early Friday, sharply higher on USD1,789.81 on Thursday.

After being shut on Thursday, US markets reopen for a half-day on Friday, closing at 1800 GMT.

Away from Covid news, the UK Competition & Markets Authority said it has secured improved commitments from Alphabet's Google on proposals to remove third-party cookies and other functions from its Chrome browser.

In June, the UK competition regulator had said it would take up a role in the design and development of Google's Privacy Sandbox proposals to ensure they do not distort competition.

"It has been investigating Google's proposals since the start of the year due to concerns that, without the Competition & Markets Authority's involvement, Google's alternatives could be developed and implemented in ways that impede competition in digital advertising markets," the CMA said Friday.

The CMA said the proposals could cause advertising spending to become even more concentrated on Google.

"The CMA's intervention, and the improved commitments, are designed to ensure that Google's proposals can improve privacy without adversely affecting competition, which would be to the detriment of users," it said.

CMA Chief Executive Andrea Coscelli said: "If accepted, the commitments we have obtained from Google become legally binding, promoting competition in digital markets, helping to protect the ability of online publishers to raise money through advertising and safeguarding users' privacy."

By Paul McGowan; paulmcgowan@alliancenews.com

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